Cooling home prices showed no signs of stopping at the end of 2022 as recent data from the leading index on home costs tallied the sixth consecutive month of slowing price growth in December.
The S&P Case-Shiller Index showed a 5.8% annual price gain for single-family homes nationwide—down from a 7.6% YoY increase in November. The National Composite Index fell 0.8% for the month, 4.4% below the market’s peak in June 2022.
All 20 cities showed monthly price declines in December, marking a median decrease of 0.8%. Annually, the 10-City Composite climbed 4.4%, while the 20-City Composite posted a 4.6% YoY gain.
Both composites saw decelerating growth compared to the same period last year.
Miami, Tampa and Atlanta reported the highest YoY gains among the 20 cities in December, climbing 15.9%, 13.9% and 10.4%, respectively.
The numbers clearly show the shifting market conditions’ impact in the second half of 2022. Despite the moderation in price growth, experts and pundits are convinced that the housing market bottomed out in December and has already started to rebound this year.
However, onlookers suggest in the report that continued affordability challenges and uncertainty in the market—especially surrounding mortgage rates—will likely weigh on buyer activity this year.
The complete data for the 20 markets measured by S&P:
Atlanta, Georgia
December/November: -0.7%
Year-Over-Year: 10.4%
Boston, Massachusetts
December/November: -0.9%
Year-Over-Year: 5.2%
Charlotte, North Carolina
December/November: -1%
Year-Over-Year: 9.9%
Chicago, Illinois
December/November: -1.2%
Year-Over-Year: 5.9%
Cleveland, Ohio
December/November: -0.8%
Year-Over-Year: 6%
Dallas, Texas
December/November: -1.1%
Year-Over-Year: 7.9%
Denver, Colorado
December/November: -1.3%
Year-Over-Year: 3.5%
Detroit, Michigan
December/November: -1.1%
Year-Over-Year: 4.5%
Las Vegas, Nevada
December/November: -1.8%
Year-Over-Year: 3.6%
Los Angeles, California
December/November: -0.8%
Year-Over-Year: 2.7%
Miami, Florida
December/November: -0.3%
Year-Over-Year: 15.9%
Minneapolis, Minnesota
December/November: -1.2%
Year-Over-Year: 3.2%
New York, New York
December/November: -0.2%
Year-Over-Year: 6.6%
Phoenix, Arizona
December/November: -1.9%
Year-Over-Year: 2.9%
Portland, Oregon
December/November: -1.9%
Year-Over-Year: 1.1%
San Diego, California
December/November: -1.3%
Year-Over-Year: 1.6%
San Francisco, California
December/November: -1.8%
Year-Over-Year: -4.2%
Seattle, Washington
December/November: -1.8%
Year-Over-Year: -1.8%
Tampa, Florida
December/November: -0.9%
Year-Over-Year: 13.9%
Washington, D.C.
December/November: -0.4%
Year-Over-Year: 4.3%
The takeaway:
“The cooling in home prices that began in June 2022 continued through year end, as December marked the sixth consecutive month of declines for our National Composite Index,” said Craig J. Lazzara, managing director at S&P DJI in a statement. For 2022 as a whole, the National Composite rose by 5.8%, the 15th-best performance in our 35-year history, although obviously well below 2021’s record-setting 18.9% gain.
“The prospect of stable, or higher, interest rates means that mortgage financing remains a headwind for home prices, while economic weakness, including the possibility of a recession, may also constrain potential buyers. Given these prospects for a challenging macroeconomic environment, home prices may well continue to weaken,” Lazzara concluded.
“The S&P Case Shiller index fell again in December, the sixth month in a row that the index has marked declining home price growth,” said Dr. Lisa Sturtevant, chief economist at Bright MLS in a statement. “While there is typically a seasonal downturn in home prices, the price decline in the second half of 2022 was steeper than what would be seen in a typical year.
“Despite the slowdown in price appreciation, home prices in December were still higher than they were a year ago. Home prices were up by nearly 6% year-over-year. By contrast, home prices had been rising by an average of nearly 13% during the pandemic. Long-term, looking back over the past decade, annual price growth has averaged around 3.5%.
“Low inventory has propped up home prices in many markets. Places where there have been year-over-year price declines are those that boomed during the pandemic, including second-home markets and rural communities at the fringes of urban areas.
“It’s possible that housing market activity hit bottom in December and that the housing market has begun to rebound in the first two months of 2023. However, there is still a lot of uncertainty in the market. Weekly data on buyer activity indicates that homebuyers may be watching mortgage rates closely. Sellers will need to price their homes appropriately to attract buyers and, as a result, we likely will see a continued decline in home price growth through the first quarter of the year,” Sturtevant concluded.
“With financial pressures at the tail end of the year compounding affordability challenges, homebuyers pulled back from real estate markets, sending sales of existing homes lower,” said George Ratiu, manager of economic research at realtor.com®, in a statement. “In turn, many would-be sellers pulled back, and those still looking to close the deal had to resort to price cuts during the winter holiday season.
“With fewer buyers active in the markets, home prices declined further, with the national index showing a much-slower 5.8% yearly gain compared with 7.6% in the prior month, or 20.6% from March 2022.
“At the end of February, housing markets reflect the winter landscape, with the number of homes for sale growing even as homeowners hold back from listing, properties sitting longer on listing portals and prices continuing to decline from their 2022 peak. Moreover, mortgage rates picked up from the first of the month, making the cost of borrowing for a home purchase more expensive, just as we move toward the critical spring season.
“The Federal Reserve remains committed to bringing inflation down to its 2% target, a goal that will necessitate additional rate hikes this year, especially in light of the latest data showing still-high price growth. Monetary tightening will continue to exert upward pressure on mortgage rates, keeping many buyers on the sidelines. Looking at the spring home-buying season, the big question on shoppers’ minds is centered on how much further prices will adjust to compensate for the elevated borrowing costs and lagging incomes. The short answer—in light of declining sales—seems to be that there is still room for further downward price adjustments,” Ratiu concluded.
